U.S. Q2 economic growth revised up slightly to 4.2 pct, growth likely to be strong again in Q3

The BEA’s second estimate showed that the U.S. economy expanded 4.2 percent in the June quarter, slightly better than the advanced estimate of 4.1 percent and above market expectations of 4 percent growth. The upward revision to headline growth reflected stronger business investment and net trade.

Real personal consumption spending continued to be solid but was downwardly revised a bit to 3.8 percent from the initial estimate of 4 percent. This reflected slightly weaker growth in durable and non-durable goods. Growth in services spending remained unchanged at 3.1 percent.

Business investment was upwardly revised to 8.5 percent from the already sound initial estimate of 7.3 percent because of spending on equipment and intellectual property products. Residential investment was downwardly revised from the advance estimate print to a fall of 1.6 percent.

Government spending was upwardly revised a bit. Exports were revised down a bit to 9.1 percent growth, countered by a downward revision to imports that are estimated to have shrank 0.4 percent in the June quarter. Thus, net trade contributed 1.2 percentage point to the headline GDP growth in the quarter.

Looking ahead, monthly indicators point towards a solid growth again in the third quarter, owing to sound consumer, business and government spending, noted TD Economics in a research report.

“We are tracking a modest slowing of GDP growth to 3.1 percent (annualized) in the third quarter as the bump from tax reform and export strength related to the front-running of tariffs fade”, said TD Economics.

However, the uncertainty in trade policy has dented business sentiment domestically and abroad, possibly leading businesses to delay further investment. Nevertheless, in spite of the downside risks from policy uncertainty and financial market volatility in emerging markets, the Fed is expected to stay on trade to gradually normalize monetary policy.

“With inflation at target and the economy running hot, we anticipate that the Fed will raise rates twice more this year, bringing the upper end of the target range to 2.5 percent by the end of the year”, added TD Economics.

At 14:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was bearish at -75.8018. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex